London: Oil traded near a six-month low as the prospects of a tight global market at the end of the year further receded after the US softened the restart of sanctions against Iran.
Crude advanced 0.6 per cent in New York. Sanctions against Iran were reimposed on Monday, though eight countries were allowed to continue temporarily buying some crude from the country, according to US Secretary of State Michael Pompeo. Hedge funds reduced bullish bets for an eighth week as extra supplies from the Organisation of Petroleum Exporting Countries (Opec) and the US assuaged concerns of a potential shortfall.
“The US has done a U-turn as compared with its previous announcements” on Iran, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “It thus comes as no surprise that speculators are squaring their net long positions in crude oil, which is likewise weighing on prices.”
Oil slid from a four-year high last month as speculation grew that Washington would grant waivers on Iranian sanctions to lower pump prices ahead of the US midterm elections, while other producers in Opec pledged to offset any supply gaps. Meanwhile, a trade war between the world’s two biggest economies stoked concern that fuel demand would suffer even as President Donald Trump said he wants to reach a pact with China.
West Texas Intermediate crude for December delivery dropped as much as 1 per cent to $62.52 a barrel on the New York Mercantile Exchange, the lowest since April 9, before recovering 0.6 per cent to $63.52 as of 1.51pm London time. Futures slid 6.6 per cent last week. Total volume traded Monday was about 4 per cent above the 100-day average.
Brent futures for January settlement rose 71 cents to $73.54 a barrel on the London-based ICE Futures Europe exchange. Prices fell 6.2 per cent last week, the biggest weekly decline in nine months. The global benchmark crude traded at a $9.86 premium to WTI for the same month.
Pompeo told reporters on Monday that China, India, Japan, South Korea, Taiwan, Italy, Greece and Turkey have been granted waivers that will allow the countries to keep buying Iranian oil temporarily. Iran can either change its behaviour or see its economy collapse, he said.